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Economic Quarterly

Summer 1999

The Importance of Systematic Monetary Policy for Economic Activity

Michael Dotsey

How the Federal Reserve reacts to economic activity has significant implications for the way the economy behaves. Yet the importance of these responses has received limited attention in the economic literature. Much of the literature devoted to the economic effects of monetary policy concentrates on the impact of random monetary policy shocks. By contrast, the author analyzes the economic consequences of the systematic behavior of the monetary authority.

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